OpenAI’s Dominance Undercut By Electricity Costs
OpenAI, the leader in the AI industry, burned through $2.5 billion in cash in the first half, mostly because of its insatiable need for electricity. The company’s revenue was $4.3 billion. R&D and data center access costs were the primary reasons for the high cash burn. OpenAI is expected to reach its $13 billion revenue forecast.
OpenAI and its primary competitors, led by Microsoft and Meta, have encountered similar issues. The supply of electricity is projected to be choked off within a year. Utilities currently lack the capacity to generate sufficient electricity to meet the needs of both residential and legacy customers. Residential customers already face rising bills, but additional capital from them will not speed the process.
OpenAI has received support from the US government through the approval of the Stargate $400 billion construction plans, which aim to increase the amount of electricity online. Oracle and Japan’s Softbank also support the project. At a White House summit two months ago, the project received the president’s blessing.
Musk Joins The Race
One of the keys to OpenAI’s ability to lead the industry is to outpace competitors with access to amounts of electricity that could power large cities. The dominance of AI server farms depends on the sources of electricity and the pace at which the centers can be built. Meta has recently launched a facility in Louisiana and Elon Musk’s xAI in Tennessee.
OpenAI’s ChatGPT leads the industry in downloads, a key factor in its current success. It requires electricity to maintain that availability.
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